Money matters

 

Wise use of public funds is perhaps the most important duty of elected officials. The Goochland supervisors who took office in 2012 crafted policies and procedures to ensure that county fiscal matters are managed with prudence and accountability. That work earned Goochland three AAA bond ratings, making it the smallest county in the country to do so. Fitch reaffirmed its AAA rating on November 19. Maintaining this standard requires constant vigilance and careful use of tax dollars.

The budget process for FY 26 is in full swing. County Administrator Vic Carpenter will present his recommended budget in February followed by a public hearing and final adoption by the supervisors in April. Property assessments for the calendar year 2025 will be mailed in mid-January.

Among measures put in place for good stewardship was a finance and audit committee, comprised of the county administrator, director of finance, and three supervisors— currently Chair Tom Winfree, District 3; Vice Chair Charlie Vaughters, District 4; and Jonathan Christie, District 3—that meets several times a year. Winfree and Christie are in their first year on the board. Vaughters has been a supervisor since late 2022.

The committee’s most recent meeting, on December 3, began with a preview of the county annual comprehensive financial report (ACFR) for FY 2024, which ended on June 30, presented by Mike Garber, principal of PBMares, LLP, (https://www.pbmares.com/) Goochland’s outside auditor.

As has been the case in past years, Garber reported that the county audit was “clean” with no findings. The 2024 ACFR is available at https://www.goochlandva.us/Archive.aspx?AMID=43. Goochland renewed its contract with PBMares for five years.

County Finance Director Carla Cave then presented preliminary first quarter projections for FY2025, which began on July 1. So far, expenditures are below budgeted amounts by a bit more than $1 million. Cave cautioned that the generous end of year surpluses the county has generated for the past few years are getting smaller.

Kevin Rotty, Managing Director of PFM Financial Advisers, LLC (https://www.pfm.com/) then led a discussion about revision of a policy regarding the amount fund balance that should be kept on hand.

The county’s “triple triple” enables it to borrow money at favorable rates.  We may never duplicate the low rates secured when the first tranche of general obligation bonds authorized by the 2021 referendum was issued in early 2022 to fund the new elementary school, courthouse, and fire-rescue station.  Rating agencies look closely at how money is managed, including reserves. These enable localities to keep operating in the aftermath of unanticipated events like a pandemic. Determining the appropriate amount of reserves, the sweet spot between reserving enough and keeping too much money “off the board,” is tricky.

Last summer, the county asked Rotty to review Goochland’s financial policies. He produced a detailed report and shared relevant parts.

The current policy, adopted last December, states that the county’s “available” fund balance, comprised of all assigned plus unassigned fund balances, should be between 55 and 65 percent with a target of 60 percent. The policies are very conservative and have proved to be unattainably so.

 According to page 43 in the ACFR, there are five kinds of fund balance:

·         Nonspendable, that cannot be spent or must be kept intact legally or contractually.

·         Restricted amounts constrained for a specific purpose by external parties, constitutional provisions, or things like courthouse maintenance funds.

·         Committed, for specific purposes committed by formal board action, like a contract.

·         Assigned, designated for a specific use by formal board action.

·         Unassigned, residual balance not other fitting into other classifications.

 

Rotty said that the unassigned category is a safety net. The revenue stabilization fund is used in the aftermath of a “shock” to the system, like a pandemic, to keep things going but must be replenished. The unassigned can be a backstop for that.

The current policy states that the available fund balance as a percentage of the general fund budget plus the non-local school operating budget threshold is 65 percent but has never been achieved.

 

Board Chair Charlie Vaughters, District 4, clarified that the discussion is about a policy put in place last year by Goochland Supervisors on county finance operations that they can change or eliminate as they deem appropriate.

 

Rotty contended that the percentage should be reduced, or the policy eliminated. Only one peer locality in Virginia, Fauquier County, has an available fund balance policy. It requires keeping two months—17 percent—of operating revenues on hand. The rating agencies use much lower thresholds to evaluate financial soundness. Moody’s for instance, uses 35 percent. Even if Goochland spent down its fund balance, it would remain comfortably over rating agency targets. If Goochland reduced just this fund balance policy to say, 40 percent, it would be $9.4 million over, instead of $12.7 million under the 60 percent policy, according to Rotty.

 

He said the current policy is like a business to keeping more than six months cash on hand.  Goochland is well above its policy thresholds for unassigned fund balance and revenue stabilization. Winfree said that establishing an unattainable goal becomes meaningless.

 

Cave pointed out that Goochland, with its “triple triple” is in elite company, but in a different situation than, say Henrico, whose budget is many times larger than ours. Should Henrico lose a major employer, it would have a smaller impact on county revenue than a similar action here, so Goochland must be more prudent to absorb unforeseen disruptions in its revenue streams.

 

Winfree contended that there “is something to be said about having excess funds sitting around”.

Cave said that when Goochland earned its “triple triple” it met the 60 percent but has since spent a significant amount on capital items including fire-rescue apparatus.

 

Rotty contended that Goochland is doing many things right and should “continue doing what you’re doing” but to remain in compliance with its policy, the county would need to come up with $12 million or reduce levels of government service. He said that rating agencies do not ask about this kind of policy. Continued cash funding of capital projects with assigned fund balance saves a “ton of money”. “Your practice of committing money to this on an annual basis, puts you in a strong position,” said Rotty.

 

Winfree wanted more time to digest what he characterized as a “huge” drop in the policy percentage and its possible negative impact on budget expenditures.

 

Vaughters favored a “step down approach” to keep the policy but gradually reduce the thresholds.

 

District 2 Supervisor Neil Spoonhower, who is not a member of the audit committee, suggested that the committee hold an informal workshop to allow others to “chime in” on the topic.  He contended that the policy is vague and asked what, if anything, the county has done to achieve the policy goals, and ramifications of its not being met or eliminated.

 

The committee voted to hold a workshop on the policy before its January meeting.